Calculate indirect costs from a direct-cost base, apply entered exclusions (including an applicable MTDC base), or fit direct and indirect costs inside a fixed budget. Select exclusions using the applicable agreement; this tool does not determine them automatically.

Apply the rate to direct costs after the entered exclusions.

Use one currency and period. Enter the authorized rate and applicable base exclusions; MTDC exclusions are not determined automatically. This planning calculation does not approve costs or reimbursement.

Indirect Costs Formula

The following formula is used to calculate the indirect costs of a budget preparation.

IC = SOR / 100 × DC
  • Where IC is the indirect costs ($)
  • SOR is the sponsors’ overhead rate (%)
  • DC is the direct cost base ($)

To calculate indirect costs, divide the percentage rate by 100 and multiply by the applicable direct cost base after any required exclusions.

Indirect Costs Definition

Indirect costs are defined as project-related costs that cannot easily be identified for a particular project. In other words, these are the overhead costs of a project.

How to calculate indirect costs?

Example Problem #1:

First, identify the applicable overhead rate. This arithmetic example uses an assumed rate of 50%; it does not establish a sponsor-approved rate.

Next, determine the direct cost base. The direct cost base of this planned project is budgeted to be $100,000.00.

Finally, calculate the indirect costs using the formula above:

IC = SOR/100 * DC

= 50/100 * $100,000.00

= $50,000.00.

Example Problem #2:

In this next example, the sponsor’s overhead rate is much higher, at 87% of direct costs.

The direct costs of this project are also higher at $200,000.00.

Using the formula as we did above, the indirect costs are calculated as follows:

IC = SOR/100 * DC

= 87/100*200,000

= $174,000.00.